Market Close Sep 07

Asian stocks lower amid deepening US-China woes

SMIC slumps on renewed US sanctions threat; Softbank under selling pressure; pound lower on fears of a no-Brexit deal; US markets closed

Asian stocks 
SMIC headquarters

(ATF) Most Asian markets fell Monday after US threats to impose sanctions on China’s largest chip maker deepened concern that worsening relations between the two will further damage the global economy.

Bourses in China and Hong Kong slid on reports that the US Department of Defense might block American companies from providing goods and services to Semiconductor Manufacturing International Corp (SMIC). That could dash what some view as China's best hope to develop a self-sufficient semiconductor industry via SMIC and further escalate the Sino-US spat that involves trade and technology, analysts said.

Hong Kong’s Hang Seng Index fell 0.4% to 24,589.65 and Shanghai Composite plunged 1.9% to 3,292.59. Analysts said the news was likely to presage a continuation of a rout seen last week in technology stocks. 

"Our risk indices have begun to turn from their euphoria highs," investment bank Jefferies said. "On the balance of probabilities, last week's correction has further room to go."

Data earlier on Monday showed Chinese imports fell 2.1% in August from a year earlier, confounding expectations for a 0.1% increase and the Ministry of Commerce said service trade declined, feeding into investor worries that the only coronavirus downturn recovery in a major economy may be waning. That outweighed even better-than-expected export growth.

Japan's Nikkei fell 0.5% with SoftBank coming under heavy selling following media reports it has spent at least $4 billion buying call options on listed U.S. technology stocks.

In currency markets, the dollar steadied in holiday-thinned trade on Monday, while traders shifted their focus to the European Central Bank's meeting on Thursday. Most analysts don't expect a change in policy stance. 

“The surge in [China’s] trade surplus could lend further strength to RMB against the US dollar, but a worsening US-China bilateral relationship might also add downside risks to RMB,” wrote analysts Ting Lu, Jing Wang, Lisheng Wang at Nomura Bank.

European markets opened slightly higher, with UK stocks benefiting from a decline in the pound on reports that Prime Minister Boris Johnson planned to rip up a key Brexit agreement, rekindling the spectre of a potentially damaging no-deal Brexit.  

US markets are closed for a public holiday.

  • Additional reporting by Reuters and AFP

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Asia Stocks:

Japan Nikkei 225 fell 0.5%

South Korea’s Kospi climbed 0.67% 

Australia’s S&P/ASX 200 rose 0.33%

Hong Kong’s Hang Seng lost 0.4%

Shanghai’s Composite plunged 1.9%

Stock of the Day:

SMIC fell 22% to close at HK$18.24 on the Hang Seng Index. "The company could go under within a few years," said Mark Li, who tracks China's chip industry at Bernstein Research.